Today’s CPI report stunned just about everyone — even me — and gold is rising strongly on the news.

February 10, 2022

Dear Fellow Investor,

I’m a big believer that we’ve ushered in an era of much higher price inflation, but today’s CPI release stunned even me.

Coming in at a 7.5% annualized headline rate, it posted another 42-year high and frazzled the markets.

Somebody, somewhere, had actually predicted a 7.5% number, but that lucky individual was an outsider. After last month’s 7.0% posting, the consensus estimate for this month was in the range of 7.2%-7.3%.

In a Gold Newsletter Alert yesterday, I worried that these forecasts were setting expectations very high, and that a moderation of the inflation rate could send gold tumbling.

In an example of gold-bug PTSD, I also worried that a hotter number could prompt a sell-off in gold, since it would encourage a more-hawkish response by the Fed.

Well, it turns out we did get a hotter number…and gold sold off just as I had worried.

Then something interesting happened: The metal began to rebound, eating away at its losses. As I write, it’s up about $6 and accelerating to the upside. Silver is outperforming and the gold stocks are in the green.

This continues a pattern of surprisingly solid performances by gold over the past week or so.

As I also commented yesterday, if someone “would have told me a week ago that we’d have rising yields, a strengthening dollar and a big positive surprise on the January job numbers, I would’ve advised gold bugs to run for the hills.”

Yet through it all, gold advanced every single day.

Today, gold is rising despite the fact that the 10-year Treasury yield has soared to 2.00% in reaction to the hot CPI number.

One of my longtime tells for a bull market is whether it rises in the face of seemingly bearish news. Gold has been doing that and, while it’s still early in the game, it seems that a very important shift in sentiment is at hand.

The last ingredient to the bullish recipe is directly ahead, with the Fed’s initial rate hike almost assuredly coming on March 16. History tells us the first hike in a cycle usually launched a rally in gold, and what we’re seeing right now could be trader’s anticipating that move.

With today’s gains, gold has risen above the key technical resistance around $1,835. In addition, it seems likely to achieve a “golden cross” within the next few days, with the 50-day moving average rising through the 200-day MA.

These improving technicals could soon bring in more traders to boost the upside momentum.

I do expect these hot inflation numbers to cool, maintaining high levels but coming off the current boil. This is a potential negative for gold over the next couple of months, but the bullish factors are really coming to the fore now.

So hang on, and make sure you’re positioned for the move.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference